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New Immigrants, New Needs:
The California Experience

The current national debate on immigration policy is
especially intense in California, home to one-third of the
country's immigrants. Much of this debate consists of
advocates stating their views without the benefit of a
nonpartisan assessment of the issue and the challenges it
poses for the state. A recent RAND study provides such an
assessment by examining how immigration has interacted with
other demographic and economic trends in California since the
1960s. The three-year study, the first to take a 30-year
perspective, profiles the changing character of recent
immigrants and considers their contribution to the economy,
their effects on other workers and the public sector, and
their educational and economic success. Its findings can
provide lessons for other states, the nation, and even other
countries.

Key Findings

The authors find that despite changes in the characteristics
of immigrants, California's employers continue to benefit
from their presence. However, the size of current
immigration flows--and the disproportionate share of poorly
educated immigrants they contain--combined with changes in the
state's economy has increased the costs of immigration to the
state's public sector and to some native workers.
Immigration's effects in the future will depend largely on
whether the federal government alters its immigration
policies to address the current changes and the state
initiates proactive policies for integrating immigrants into
its social and economic fabric.

The New Immigration

Immigration into California, both legal and illegal, has
increased at unprecedented rates over the past 30 years.
During the 1970s, more immigrants--1.8 million--entered the
state than in all prior decades combined. That number
doubled again to 3.5 million in the 1980s, and the 1990s rate
has remained high despite a severe recession in the decade's
early years. As a result, immigrants now constitute more
than one-fourth of California's residents and workers and are
responsible for more than half of the growth in the state's
population and labor force.

The composition of the immigrant flow has also changed
dramatically. As Figure 1 shows, about half of California's
recent immigrants come from Mexico and Central America, and
another third come from Asia. These groups are less
educated, are younger, and have more children than immigrants
elsewhere. They also are more likely to be refugees and
undocumented. For all these reasons, immigration is
affecting California more substantially than any other state
in the nation.

Figure 1--The Origins of California's Immigrants Have Changed

Immigrants arrive with all levels of education, but on
average their educational levels have declined relative to
those of the native population. This decline is particularly
significant, because the rate at which immigrants and their
children succeed economically and socially depends directly
on how educated they are. Highly educated immigrants reach
economic parity with native residents within their lifetimes.
Those with extremely low levels of education--mainly from
Mexico and Central America and refugees from
Indochina--command low earnings and make little economic progress in
their lifetimes (Figure 2). Their limited prospects raise
important concerns about whether and when their children will
be able to reach parity with other groups.

Figure 2--Immigrants from Mexico Make Little Economic Progress
in Their Lifetimes Compared to Immigrants from Japan, Korea, and China

The Economic Benefits

California's employers, and its economy in general, have been
the main beneficiaries of immigration. Immigrants are paid
less than native workers at all skill levels but are equally
productive employees. As a result, they have contributed to
California's faster economic growth compared to the rest of
the nation from 1960 to 1990 (Figure 3). Even when
California's growth advantage disappeared during the depths
of the 1990-94 recession--to which immigration did not
contribute--immigrants continued to arrive in the state in
great numbers and to hold down its labor costs.

Figure 3--Immigration Has Contributed to California's Disproportionate Growth in Employment

The Costs

However, these economic benefits have not come without
certain costs. A concentration of refugees and other
low-income immigrants that make heavy use of public services has
had a negative fiscal effect on California. The greatest and
most enduring impact has been on the state's public education
system: predominantly of childbearing age and with fertility
rates higher than those of the native population, immigrants
have contributed significantly to the state's rapid increase
in primary and middle school enrollments. The effect of this
increase on the state's community colleges and universities
has yet to be fully felt (Figure 4).

Figure 4--California's 16-Year-Old Population Will Increase by Year 2005

The report points to other costs as well. Because the demand
for low-skilled workers has been declining, the continuing
influx of low-skilled immigrants has held down both the
earnings and the job opportunities of the low-skilled labor
force. Overall, California is losing low-skilled workers to
other states, and between 1 and 1.5 percent of the state's
adult native population has left the labor force or become
unemployed because of competition from immigrants.
Immigration has also contributed to the widening income
disparity among the state's workers and to the loss of their
educational advantage over workers nationwide.

Immigrants' Prospects

Recent changes in California's economy do not bode well for
low-skilled immigrants. Employment growth recently picked up
from what it was in the recession of the early 1990s, but it
is not expected to return to the rapid pace it maintained
prior to 1990. Moreover, as the state's economy has shifted
to the higher-skill, service and technology industries,
employers have begun to seek a more highly educated
workforce. Between 1970 and 1990, 85 percent of California's
new jobs went to workers with at least some postsecondary
training. As the economic prospects of these well-educated
workers improve, the prospects of the less educated diminish:
they compete for fewer jobs and face slow growth in their
career earnings. Finally, California-voter resistance to
increasing taxes, exemplified by Proposition 13, has limited
the funds available to the state and to local governments,
leading to cutbacks of many programs.

When these factors are combined with continued high levels of
immigration, the signposts all point to a widening gap
between what the state's economy and public services can
provide and what the growing numbers of poorly educated
immigrants need. Given these trends, California will find it
increasingly difficult to maintain--let alone improve--the
prospects of low-skilled immigrants and their children and to
ensure that immigration remains an overall benefit to the
state's economy and residents.

Recommendations

The federal government sets the policies that determine how
many and which immigrants enter California. The authors
recommend that the federal immigration policies be changed
to: (1) provide the flexibility needed to change immigrant
quotas and entry criteria as needed to maintain modest levels
of immigration and to emphasize the educational level of
immigrants; (2) provide financial relief to states bearing a
disproportionate share of costs associated with immigration;
(3) control levels of illegal immigration; (4) recognize the
special relationship between Mexico and the United States and
expand U.S.-Mexico cooperation on immigration issues.

For California, the authors recommend that the state develop
proactive policies for integrating immigrants both socially
and economically. Since education is the most important
determinant of the success of immigrants and their children,
California must--above all else--make special efforts to
promote high school graduation and college attendance for the
children of immigrants, most of whom are born in the state.
In addition, the state should work with the federal
government to sponsor programs that encourage naturalization
and expedite English proficiency for adult immigrants already
living and working in California.

RAND policy briefs summarize research that has been more fully documented elsewhere.
This policy brief describes work done for RAND's Center for Research on Immigration
Policy in the Institute on Education and Training with
funds from the Office of the Secretary of Defense, the James Irvine Foundation,
The Ford Foundation, the William and Flora Hewlett Foundation, the Andrew F. Mellon
Foundation, and the California Business Roundtable. This work is documented in
Immigration in a Changing Economy: California's Experience, by Kevin F.
McCarthy and Georges Vernez,
MR-854-OSD/CBR/FF/WFHF/IF/AMF, 1997, 370 pp., ISBN: 0-8330-2496-5;
and in a related summary volume: Immigration in a Changing Economy: California's
Experience--Questions and Answers, by Kevin F. McCarthy and Georges Vernez,
MR-854/1-OSD/CBR/FF/WFHF/IF/AMF,
1998, 51 pp., ISBN: 0833025562, available from National Book Network (Telephone:
800-462-6420; FAX: 301-459-2118).
Profiles of the Center for Research on Immigration Policy and the Institute on
Education and Training, as well as abstracts of their publications and ordering
information, may be viewed on the World Wide Web ().

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